How do home insurance deductibles work?
Updated: Oct 6
If you have a home insurance policy, you have a deductible or deductibles. Your deductibles can vary from a small deductible such as 500 or a higher deductible such as 10,000. These types of deductibles are many times referred to as "flat" deductibles or in other words they dont change. In some cases you may also have a percentage deductible such as 0.75% up to 10%. These deductibles are a simple calculation of that percentage multiplied times your dwelling coverage A. Coverage A is the amount of coverage you have purchased for your dwelling structure. Example: (300,000 Dwelling x 0.75% deductible =2250 deductible)
Many times your home policy will be divided into two types of deductibles.
1.) All other perils
2.) Wind and Hail
All other perils typically refers to lightning, fire, vandalism, freezing of pipes, theft, explosion just to name a few.
Wind and Hail is, well Wind and Hail.
Now that we have discussed the types of deductibles you will find on your policy, lets go over how deductibles work. First and foremost; deductibles are a good thing and here is why. Deductibles keep your cost of insurance down by keeping a portion of the risk or financial responsibility on your side which is reflected in a lower premium as your deductible goes up and visa versa as your deductible goes down. I like real world examples so here is a deductible example after a windstorm.
Larry's home gets hit by a hailstorm. Larry has damage to his entire shingle roof. Larry files an insurance claim. Larry's cost to replace the same roof is $15,000. Larry's deductible is 2500. The insurance company writes Larry a check for $12,500. (15,000-2500=12,500)
Another scenario is that Larry has slight damage to his home from a windstorm. Larry has damages that total to $750. Larry makes repairs out of pocket to repair his home.
I hope we have helped simplify how deductibles work as well as explain the different types of deductibles. For more information please feel free to reach out to us direct.
Mike Goodman, Agent